FREE Trial S
Answered step by step
Verified Expert Solution
Link Copied!
Question
1 Approved Answer

Airline will purchase 2.5 million gallons of jet fuel in one month and hedges using heating oil futures. From historical data S.D of futures and

Airline will purchase 2.5 million gallons of jet fuel in one month and hedges using heating oil futures. From historical data S.D of futures and spot price have been 0.0413 and 0.0363, respectively. The correlation between the spot and futures prices of the underlying is 0.895. In addition, the size of one heating oil contract is 42,000 gallons; the spot price is 2.32 and the futures price is 2 (both dollars per gallon). What is the optimal number of futures contracts with tailing of the hedge?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image
Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_step_2

Step: 3

blur-text-image_step3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Handbook Of Research In Education Finance And Policy
Handbook Of Research In Education Finance And Policy

Authors: Helen F. Ladd, Margaret E. Goertz

2nd Edition

ISBN: 0415838010, 978-0415838016

More Books

Students explore these related Finance questions

Question

Ted and Luke Thorndike have just returned from lunch with Candice Ergonne, president of a chain of 550 health clubs located across the United States. The clubs have a quality image and are known for...

Answered: 3 weeks ago

Question

Leasing Equipment Corporation (LEC) agrees to lease five computer workstations to Mapmakers, Inc. Before any interest in the workstations can pass from LEC to Mapmakers, they must be a. in existence...

Answered: 3 weeks ago

Question

=+F. Show that the random variable F(X) is uniformly distributed over the unit interval in the sense that P[F(X) u] =u for 0 u 1. Passing from X to F(X) is called the probability transformation.

Answered: 3 weeks ago

Question

In an attempt to identify ecologically friendly methods for controlling mosquito populations, researchers conducted eld experiments in India where aquatic nymphs of the dragony Brachytron pretense...

Answered: 3 weeks ago

Question

Can someone tell me if I have errors in my code? Also please code the average: .data prompt1: .asciiz "Enter the number of values: " prompt2: .asciiz "Enter an integer value: " error: .asciiz "Error:...

Answered: 3 weeks ago

Question

(filename: CountNumbersAboveAve.java ) Write a program that first randomly generates and displays 10 whole numbers between 0 and 100, saves them into an output file, and calculates the average. The...

Answered: 3 weeks ago

Question

LMN makes hand embroidered sweatshirts to customer specifications. The following detail is available from the company's budget: Cost centre Overheads (RM) Activity Cutting and sewing 93,000 37,200...

Answered: 3 weeks ago

Question

ME296V HW1 Only neat individual work Prob.1 Find the steady state error value for G(s) = s+1 s+s+1 with a ramp input (10 pts) Prob.2 Find the open loop error transfer function for G(s) given in...

Answered: 3 weeks ago

Question

Gator Inc. reported taxable income of $1,550,000 this year and paid federal income taxes of $325,500. Included in the company's computation of taxable income is gain from the sale of a depreciable...

Answered: 3 weeks ago

Question

Suppose your department decides to host a celebration because they exceeded sales expectations for the quarter. If you were only focused on equality, what would you do? Limit institutional barriers...

Answered: 3 weeks ago

Question

Income Statement Revenue: Collars $ 322,560 Leashes 271,040 Harnesses 312,500 Total Revenue: $ 906,100 Cost of goods sold 28,258 Gross profit $ 877,842 Expenses: General and administrative salaries $...

Answered: 3 weeks ago

Question

3 What can be learned from Indian HRD, and its integration of Western and nonwestern approaches to managing people, in order that it can be applied in African countries?

Answered: 3 weeks ago

Question

Corporations are discovering that their core capabilities lie not in particular products or product categories, but in unique expertise.

Answered: 3 weeks ago

Question

CEOs are aiming their internal and external processes directly at customer satisfaction.

Answered: 3 weeks ago

Previous QuestionNext Question